Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Risks and rewards for homeowners overseas

Low mortgage rates have helped push the number of Britons owning property overseas above 1m but now a new survey claims four in 10 are surprised at how expensive it is to maintain homes abroad. Purchase price is just the beginning of the outlay with property ownership anywhere but international holdings can bring additional problems.

You might think it obvious that taxes do not end at Dover but three quarters of the overseas homeowners who responded to a Post Office questionnaire cited council tax as the biggest unexpected expense, followed by 40 per cent who were unprepared for the cost of maintaining communal areas.

Against all that, a more positive picture emerges from NatWest, which says that 58 per cent of the expats it asked find life abroad "better than expected" – and this satisfaction rate rose to 71 per cent among pensioners who reckon retiring overseas was the right move for them. Dave Isley, head of NatWest International Personal Banking said: “Expats are happy with their chosen life paths. It’s encouraging to see that the majority of expats believe they made the right decision and are living their chosen dream."

While recent weakening of the euro has helped Britons on the Continent who retain sterling-denominated income, financial advisers point out that many remain exposed to currency fluctuations – and steep money transfer costs. Ray Boulger, a director of mortgage brokers John Charcol, said: “The most important considerations when buying overseas is what currency to borrow in – and the default option should normally be to borrow in the local currency”

The reason is that the value of the asset and the liability in sterling terms will both increase or decrease in line with changes in the exchange rate.

Fluctuations have been particularly volatile since the global credit crisis began. Currency specialists HiFX reckon the typical Briton with property overseas sends £10,000 a year abroad to cover maintenance and other foreign expenditure. But he or she would have needed to send an extra £2,000 to Continental Europe to maintain local purchasing power when sterling hit a low-point against the euro just before the General Election.

Even after the pound’s recent recovery and the euro’s weakness, British owners of property on the Continent need to send nearly 7 per cent more abroad to buy the same goods and services that their pounds would have bought in October, 2008.

Those with second properties in America need to send more than £13,000 across the Atlantic to buy what £10,000 would have obtained in March, 2008.

No wonder the traditional City advice for anyone tempted to speculate on exchange rates is to lie down in a darkened room and wait for the feeling to go away. A more practical alternative for buyers of properties overseas is to lock into fixed exchange rates at which they know they can balance their books. There is no need to pay a fee for this but rates will be poorer than those which offer no protection against future fluctuations.

Mark Bodega, a director at HiFX, said: “A regular payments abroad plan also saves you forking out on commission and transfer fees. Banks typically charge up to £30 as a transfer fee on each and every transaction, up to 2 per cent commission on the amount being transferred and, depending on the destination bank account, you may also be charged a further 0.5 per cent receiving fee by the overseas bank.”

If you wondered why the Post Office should care about the cost of home ownership abroad, the explanation is that it aims to promote its fee-free foreign currency transfer service. Head of international payments, Sarah Munro said: “Overseas property owners can be stung with higher bills for transferring money abroad. Our customers can benefit from the ability to fix for a year at a competitive exchange rate and avoid any nasty surprises.”

Just like taxes, sneaky small print and bank charges do not end at Dover.